Question

Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales. All of the company's transactions with customers, employees, and suppliers are conducted in cash; there is no credit. The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $88,000 of manufacturing overhead for an estimated activity level of $40,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows: Raw materials Work in process Finished goods $ 10,600 $ 4,400 $ 8,200 During the year, the following transactions were completed: a. Raw materials purchased for cash, $163,000. b. Raw materials requisitioned for use in production, $140,000 (materials costing $127,000 were charged directly to jobs; the remaining materials were indirect). C. Costs for employee services were incurred as follows: Direct labor Indirect labor Sales commissions Administrative salaries $175,000 $335,700 $ 20,000 $ 44,000 d. Rent for the year was $18,000 ($13,800 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $18,000, 1. Advertising costs incurred, $12,000. 9. Depreciation recorded on equipment, $24,000. ($18,000 of this amount was on equipment used in factory operations, the remaining $6,000 was on equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $2 i. Goods that had cost $229,000 to manufacture according to their job cost sheets were completed. j. Sales for the year totaled $499,000. The total cost to manufacture these goods according to their job cost sheets was $218,000.

Answer 1

Goldnest Company Requirement 1 Requirement 2 140000 Journal Enteries Trans. Particulars a. Raw materials a/c To Cash Raw Materials 10600 b. 163000 Debit in $ Credit in $ 163000 163000 Beg. Bal a. Dr. End Bal. 173600 33600 173600 b. 17360 127000 Work in process a/c Dr. Manufacturing overhead a/c Dr. To Raw materials 13000 140000 229000 Beg. Bal b. Work In Process 44001. 127000 1750001 c. 175000 335700 Work in process a/c Dr. Manufacturing overhead a/c Dr. Sales commissions expense a/c Dr. Administrative salaries a/c Dr. To Cash C. h. 385000 20000 44000 462400 End Bal. 691400 574700 691400 d. 13800 Manufacturing overhead a/c Dr. Rent expense a/c Dr. To Cash 4200 218000 Beg. Bal i. 18000 Finished Goods 8200 i. 229000 End Bal. 237200 19200 18000 237200 Manufacturing overhead a/c Dr. To Cash 18000 f. 12000 b. Advertising expense a/c Dr. To Cash 12000 C. Manufacturing Overhead 13000 h. 385000 335700 13800 18000 18000 d. e Manufacturing overhead a/c Dr. Depreciation expense a/c Dr. To Accumulated depreciation 18000 6000 24000 End Bal. -13500 385000 385000 Cost of Goods Sold 218000 j. h. Work in process a/c Dr. 385000 To Manufacturing overhead 385000 175000 x 220% Predetermined overhead rate = Estimated manufacturing overhead cost Estimated total amount of the allocation base = 88000 / 40000 = 220% Requirement 3a. i. i Dr. 229000 Finished goods a/c To Work in process Manufacturing Overhead is overapplied 229000 Requirement 4 j. Dr. 499000 Cash a/c To Sales (Cash sales) 499000 499000 -218000 281000 Dr. 218000 Cost of goods sold a/c To Finished goods 218000 Income Statement Sales Cost of Goods Sold Gross profit Selling and administrative expenses: Sales commissions Administrative salaries Rent expense Advertising expenses Depreciation expense Net operating income 20000 44000 Requirement 3b. 4200 12000 6000 Journal Enteries Trans. Particulars Manufacturing overhead a/c Dr. To Cost of Goods Sold Debit in $ Credit in $ - 13500 86200 194800 - 13500